Could Apple TV Cut Your Cable Bill?

By Quentin Fottrell

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Apple TV might do for the cable bill what competition from streaming-video sites like Netflix could not: lower it.

Though Apple is not a company known for reducing prices, experts say the company’s push to replace the cable box with its own hardware and software could lead to cheaper TV. Apple is in talks with some of the biggest U.S. cable operators to sell set-top boxes directly to consumers, The Wall Street Journal reported last week. And the company was granted a patent for a set-top box to stream live TV and to record shows. Apple currently sells a $99 set-top box that streams content from iTunes and other online media services like Netflix and Hulu, but not live television.

By striking such a deal, Apple would spare cable companies the expense of supplying and maintaining rented set-top boxes — and the hassle of trying to retrieve them when contracts end. “It could push down the price of cable if it allows consumers to sidestep the high price of leasing set top boxes,” says Craig Moffett, senior analyst with Sanford C. Bernstein. “That’s something everyone, including the operators, would celebrate.” Consumers pay $10 to $15 to rent boxes from cable companies. The average monthly cable bill is $86, according to the NPD Group. Of course, the new Apple TV device itself would likely come with a price tag to rival the iPhone’s.

There are some big financial incentives for cable operators to get out of the hardware business and focus on wireless and cable services. Equipment for consumers’ homes and businesses makes up about 40% of cable operators’ annual capital expenditure, and set-top boxes account for most of that amount, says market researcher SNL Kagan. Total capital expenditure for the U.S. cable industry was $13 billion in 2011, according to data from the National Cable & Telecommunications Association. Apple did not respond to requests for comment.

Cable companies aren’t exactly under tremendous pressure to partner with Apple, however. To date, only a small number of subscribers have abandoned cable in favor of online services. Publicly traded cable, satellite and phone companies lost 200,000 subscribers, or 0.2% of the 100 million pay-TV subscribers, in the second quarter, says Dan Rayburn, an industry analyst with Frost & Sullivan. But that doesn’t account for those who merely cut back on some of their cable services, he says. “The market for cable alternatives is already fragmented, and with Apple TV, that’s only going to get worse,” Rayburn says.

Still, Apple may also be a better partner than competitor, industry pros say. “Cable companies have to be seriously worried that they’re facing off against a company that has managed to successfully reinvent existing devices,” says Jeff Haynes, editor at TechBargains.com. Partnering with Apple would offer “significant” protection from satellite and video-streaming services like Netflix, Moffett says. “It’s hard to imagine an Apple set-top box that did not incorporate video-over-the-Internet as a key element,” he says.